REPORT ON IFRS 15
    Serial Number
    Contents
    Page Number
    1.
    Introduction
    1
    2.
    Comparison between IFRS 15 and IAS 18 and IAS 11
    2-6
    3.
    Impact of requirements IFRS 15 on entities
    7-8
    4.
    Conclusion
    9
    5.
    References
    10
INTRODUCTION
Revenue of a company is one of the most important information that an investor analyses for investing in a company. The stakeholders’ interest lies with the revenue that their company is able to generate with the given assets owned by the company. International Financial Reporting Standard (IFRS) 15 brought by the International Accounting Standards Board deals with the revenue from contracts with customers and the recognition of revenue. Prior to the advent of IFRS 15, International Accounting Standard 18 and, International Accounting Standard 11 were in the play. But after rigorous discussions and meeting between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), IFRS 15 was issued regarding the recognition of revenue in the financial statements.
The introduction of IFRS 15 aims at removing the inconsistencies in the GAAP and other disparities regarding the revenue recognition. The application of IFRS 15 was made mandatory from 01.01.2017 for the companies using IFRS currently and for companies applying GAAP, the application of IFRS 15 was mandated from all reports made after 15.12.2017. IFRS 15 aims at recognizing the revenue on the basis of the obligations fulfilled by a company for a customer’s contract and recognize such part of the revenue of the total contract.
COMPARISON BETWEEN IFRS 15 AND IAS 18 AND IAS 11
The introduction of IFRS 15 was necessary as there were limitations in the previous corresponding accounting standards and such limitation created issues while reporting the complex transactions. The disclosures made in the previous standards did not provide the investors with relevant information and were not enough for the stakeholders to understand the assumptions in the recognition of the revenue by the company. The IFRS 15 aimed at develop a more comparable representation of the revenue in case of contracts and generalize the recognition of revenue from contracts in a standard way which would eventually remove the effort of learning the recognition criteria on case to case basis thereby giving the stakeholders all the useful information (Mattei, G. and Paoloni, N., 2019). In the previous system of revenue recognition, there were many inconsistencies which forced the companies to treat the same transaction in different ways. In the IFRS 15, the recognition of revenue was classified in a procedure of five steps which are as follows:
Step-1- Identification of a contract of a customer- IFRS 15 is applicable on the recognition of revenue in case of a contract and IFRS 15 will be applied individually in every contract. This aims at the realization of money by the company for the goods and services already provided by the company.
Step-2- Identification of the obligations in a contract- The Company has to identify the work that the company has to do for the customer as per the contract. The performance obligation of the contract can be distinctly identified and the revenue should be recognized based on such performance obligation as and when satisfied.
Step-3- Determination of the transaction price- The amount for which the contract has been decided is the transaction which may also include the changes in case of variations and adjustments. This is basically the sum of the value of obligations as segregated by the company based on the obligations of the company.
Step-4- Allocation of the transaction Price- For every performance as provided by the company, predetermined transaction price must be allocated for that performance. This can either be done by the method of adjusted market assessment approach or Expected cost plus a margin approach or the residual approach as selected by the company.
Step-5- Recognition of revenue when such obligation is completed- The Company can recognize the revenue of the performance obligation as allocated when the satisfaction of such obligation is completed. There are three conditions on the satisfaction of which the revenue of the contract or part of the contract in performance obligation can be recognized (Tong, T.L., 2014).
In the previous standards the revenue recognition criteria would vary between the companies, industries and the capital market. The IFRS 15 would affect the changes in few companies but that is important to bring consistency in the revenue recognition practices followed in across the globe (Oyedokun, G., 2016). The small contracts would have little effect because of the IFRS 15 but the long term contract would go through substantial change in the revenue recognition. The following table compares the various aspects of the existing practice and the IFRS 15:
    Area of comparison
    Existing...